Customers in Ubumwe Grande Hotel’s restaurant in Kigali. PHOTO | NMG
Rwanda’s signature hotel development, Ubumwe Grande Hotel, risks
liquidation as KCB Rwanda seeks to recover a $19 million outstanding
loan.
KCB Rwanda managing director George Odhiambo said
the bank has issued a notice of intention to foreclose on the facility
after Ubumwe’s developers failed to service the loan, whose value he
puts at “slightly above $18 million.
“We have issued a
final demand and a notification to Rwanda Development Board. So from
there, we will be seeking permission to proceed,” Mr Odhiambo told The EastAfrican.
This
means that the RDB has the option to appoint auctioneers to carry out
valuation of the property and advertise a date for auction.
The
second option is for RDB to appoint a receiver manager to run the
business. Acacia Property Developers Ltd (APDL), the owners of the
property, have also apparently been put on notice by KCB Rwanda, that
the bank will be seeking full recovery of the outstanding sum or else it
will put the hotel on the market.
“We are in a
situation where the servicing of the credit facility must happen and if
it doesn’t then we must recoup the investors’ money,” said Mr Odhiambo.
While
the developers declined to comment on the issue, sources place the
blame on Nepal-based trading outfit Chaudary Group (CG) owned by
millionaire B.K. Chaudary, which failed to fulfil its obligations under a
complex three-way partnership that birthed APDL, the Rwandan holding
company that owns the hotel.
According to
filings at companies registry, APDL is 80 per cent owned by Zinc Africa
Hospitality Ventures (ZAHV) and 20 per cent by Kigali Real Estate (KRE)
Ltd, a Rwandan company. ZAHV is a special purpose vehicle registered in
Singapore, in which African Eagle Ltd (AEL) and CG Group hold equal
stake.
According to sources, CG Group contributed $5.5
million to the construction of the multimillion-dollar property while
the $19 million was borrowed and the rest contributed by AEL and KRE.
Under the shareholders’ agreement, APDL would develop the hotel but it
would be managed by CG Group under its Zinc Hotels brand.
CG
registered Zinc Hotels Kigali to represent it in the management
contract. But the Zinc brand never went into operation and APDL and
Kigali Real Estate, the minority shareholder, have been managing the
business since its opening in mid-2016.
According to
legal sources in Kigali, who have been following the dispute, trouble
started early in 2016 when CG began to “abscond” on their obligations as
the property was nearing completion.
Rather than
bring in a management team as they had promised, CG subcontracted other
companies to manage the hotel. The subcontractors allegedly failed to
perform, putting the project in jeopardy.
These
companies had no experience anywhere in Africa, so they soon ran into
problems and KRE the local shareholder took most of the responsibility,
says one source.
One of the companies also abruptly
terminated its subcontract with CG, three months to the scheduled
opening of the hotel, once again throwing the plans into disarray.
Under
pressure to deliver the project in time for the African Union Summit
that Rwanda was hosting in July 2016, APDL had to take on the challenge
with support from KRE to manage the hotel. During a shareholders’
meeting, CG reportedly rejected all propositions offered by the other
shareholders to resolve the matter.
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